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@James U, I bet on a 174-times return (not just 10-20) for my 0.5¢ Focus mothers, haha:) When the cash-cow Focus mothers were hovering at 60-70¢ four years ago, I told the readers to wait for the fierce and greedy "sharks" or manipulators to smash them all down to 0.5¢ (safest)! Yet, they fail to purchase any Focus share, but I had four years to study for just one counter:)
The Edge published a special report in 2020 "Hidden Hands behind Penny Stock Surge". Focus Dynamics is just one corner of the huge spider web. I don't disagree that it could be fun and exciting to allocate a small portion of capital for speculation, but one still needs to weigh the odds of winning. The odds of striking lottery is better than 0.5 sen Focus returning 174 times to regain its all time high. Even if the share price were to recover, there could be rights issue, PP and others along the way. There are many casinos in the world. Why walk into one that is rigged against you?
@James U, I understand your concern as I used the same article to warn my readers, "four years ago," not to buy any share until 0.5¢ -- no way down:) In 2020, I bet on the 100-year opportunities on GENM (RM2) and (RM3), but the returns were nowhere near 100%! Focus caught my eye due to its very high gross margins!
Google AI:
"Below are the approximate gross margins for Focus Dynamics Group Berhad (FOCUS.KL) for recent fiscal years:
FY2025 (TTM): 57.49%
FY2024: 59.24%
FY2023: 58.81%
FY2022: 50.51%
FY2021: 50.61%
FY2020: 52.19%
The gross margin for the trailing twelve months (TTM) as of a recent report is 57.49%. The average over the past five complete fiscal years (FY2020-FY2024) is calculated from the annual report data."
Google AI:
"The average gross margin for YTL Power International Bhd (YTL Power) over the past five fiscal years (ending June 30, 2020 to 2024) was approximately 19.9%."
But, you need not worry as you will not buy any Focus share, no matter how cheap:) I responded to your comment because any blue chip will not give you a 10-to-20-times return!
I give you one fact: 45 days ago, I already had the 0.5¢ mothers, and all 1¢ ones during that day were all bought! I could have an easy 100% return, but I aimed higher, 174 times or 17,400%:)
I am doing a victory lap because all my four-year predictions are fulfilled now, including all Focus mothers, sons, and daughters would be smashed by the "sharks" (thanks, Kenneth Vun) to 0.5¢, and the sons would be delisted!
I understand your strategy. But first let's talk about the gross margin analysis by Google AI. Gross margin has no meaning as the net margin has been negative for most of the quarters. In fact even if the company records accounting profits it is still meaningless since it won't return cash to shareholders. According to KLSE screener info, this company has never paid a single cent of dividend in its existence! So the comparison with YTL Power, which returns cash to shareholders despite lower gross margin, is like apple to orange (a rotten one)
I don't dispute that the strategy of buying at the lowest bid (0.5 sen in Bursa) and sell at the next higher bid (1 sen) looks appealing, in theory. Such strategy can be applied to all penny stocks as long as there is sufficient liquidity and the stock is not at immediate risk of suspension, delisting or other surprises. So whether it's Focus Dynamic or other penny stocks, as long as the conditions fulfil, it still works, theoretically.
However, liquidity, trading cost, opportunity cost (the time to complete buy at 0.5 sen and sell at 1 sen) are important consideration. Take Focus for example, over the last 1 year the share price has drifted from 2 sen to 1.5sen, then to 1 sen, and now 0.5sen for the last few months. During this last few months, except a few occasions which you happen to come across, most of the time the daily trading volume just ranged from a few hundred Ringgit to a few thousand Ringgit a day. But I notice there are many bids in the 0.5 sen queue probably employing the same strategy as you.
On 20Nov, there was just one single transaction at 0.5 sen where 35,000 shares were sold to the buyer. The gross transaction amount was 35,000 * RM0.005 = RM175! The buyer had to pay RM1 stamp duty, and possibly a few ringgit of minimum brokerage fee.
After getting the 35,000 shares at 0.5sen, one can queue to sell at 1sen to realise a 100% profit, which is just RM175 before cost. But I'm not sure how long is the wait. Hence the opportunity cost. But the longer the wait, the higher the uncertainty due to factors such as suspension risk, delisting risk etc.
May be it's an OK strategy if applied across many stocks currently trading at 0.5sen. Otherwise the strategy is hard to scale due to liquidity constraint. Nonetheless I don't dispute a 100% profit opportunity (before cost). When I say the odds are better in striking lottery, I refer to buying at 0.5sen and expecting it to return 174X i.e. to ride the stock price back to 80+ sen.
It is not called net margin but profit, which is mingled with the "paper" (or unrealized, accounting term) loss/profit of Focus's stock investments like Gocean. To turn a paper profit, the sharks just need to goreng up Gocean -- hence, net profit. This is why Warren Buffett emphasizes a gross margin ((revenue - direct costs)/revenue x 100%), and not net profit! Buffett said that if a company has consecutive gross margins of more than 40%, it will be a market leader!
Google AI:
"Warren Buffett generally looks for companies with a consistent gross margin of 40% or higher, as this indicates strong pricing power and a durable competitive advantage (moat). The overall gross margin for Berkshire Hathaway Inc. as a conglomerate, however, has fluctuated and is currently lower, around 17-24%."
If Focus was not a cash cow, it could not afford to open the expensive F&B outlets or brands over the past several years, and recently The Arch Galeries (roughly RM220M construction cost), which held the biggest Hennessy Artistry music event last Saturday. It has the largest event hall next to TREC (bars and clubs), and opposite to TRX -- these two areas have no lack of high-valued foreign customers, who can pay for Focus's expensive spirits -- one was priced more than RM12K per bottle!
You are right about the risky penny stocks, but I spent four years to gain enough information and facts that Focus is not like one of them. In fact, I told the readers four years ago that all penny stocks were potentially PN17, except Focus:) Like you said, you need time to study a stock in detail to gain any confidence.
If the gross margin was positive each quarter since at least 2019, it meant at least half of the revenue was the gross profit (aka cash flow), but where did this cash go each quarter? It was hiding under "Other Operating Expenses" for opening new outlets, brands, or The Arch Galeries.
In short, why would anyone think that Focus was unprofitable if it could sell the RM12K/bottle to rich alcoholics both in physical stores and over the net?
During 2020 with COVID-19 MCOs, the bogus "net profits" were all green, and the highest profitable quarter was RM9.46M, but all were paper profits due to manipulations! The CEO and the business model are the same since at least 2017!
For example, the quarterly profit for the financial period ended 30 Sep 2020 was RM5.9M (net profit), but the actual cash flow was RM10.1M (gross profit)!
We all know Focus is a "crazy shark" counter. The 87¢ investors have already lost 174 times! If Kenneth Vun is crazy enough, it could even goreng up to 100¢ -- no logic or fundamentals, but based on his moods:) He is back from the HK exile (unscratched from COVID-19) and has become a CEO for two listed companies here! The CEO, Tay Ben Seng, has proved his leadership and vision by making The Arch the next-level, lifestyle (high-class or fashionable) entertainment and F&B hub!
There is another motive for 87¢. The last time maintaining the 60-70¢ range, Focus had about RM90M cash from the Focus-PA conversions -- price of PA + 49.5¢!
Currently, my RM1.52 GENM (another 100-year opportunity) bought in April is nowhere near a 100% return. You cannot plan the 100-year opportunities, which are emerging in nature -- only a few of them over the past five years!
The next issue is beyond science -- can you predict WW3? I predicted Pfizer vaccines and the end of COVID-19 based on science, but the 3rd world war needs another tool:) Regardless, the 0.5¢ shares include that risk!
My 0.5¢ Focus-PA, collected over the past three years, have shielded me from a potential WW3 -- honestly, why would anyone want to buy a stock above 0.5¢ after the Russia invasion?
I'm impressed that you could spend 4 years following a company whose share price dropped by more than 99%; waited patiently to buy at the lowest bid of 0.5 sen, yet expecting it to return 174 times. If it's truly a hidden gem, let's say with an intrinsic value of near RM1 (since you've mentioned 174 times return), why not buy it when it's 50 sen, 30 sen, 10 sen, or even 2 sen? Why are you so confident that it would hit 0.5sen? Is it because you know the share is being manipulated? If it has been manipulated in the past, why would you expect that it can return to its previous height? Is it because you expect the syndicate to repeat another round and you can ride along?
If that's the thinking, any story around the company business potential, IMHO, is just a story. The level of gross margin varies depending on industry. 99SMart has a wafer thin gross margin, yet it's hugely profitable. On the other hand, many industries with high gross margin are loss making. In FOCUS case, they suffer operating losses
Yes, part of the operating expenses could be spent on furnishing the brand image, e.g. through advertising & promotions. While it's expensed off in accounting, from valuation stand point we may choose to capitalise as intangible brand assets. However, the intangibles will still need to be amortised over time. Yes, one may argue that the current year advertisement spending should be deducted from operating expenses (because they are for future benefits). However, by the same arguement, the advertisement spending in the last few years have to be brought into the current year. So the net effect is operating expenses are still incurred. There is no free lunch. An operating loss is an operating loss. A company cannot survive on gross profit alone.
Besides one could also question how effective is those promotion and advertising spending to shore up the brand value. If the brand value is so great, why did FOCUS suffer from declining revenue quarter after quarter? The 12k per bottle spirit remains just a price tag, an inventory with carrying cost, if the company cannot sell sufficient number of them to generate higher turnover.
I stop looking further into this company when I found out it has changed its financial year end three years in a row - in 2022, 2023 and 2024! Many companies that got into trouble shared the same pattern. This is certainly a red flag to me.
Don't get me wrong. I don't disagree that some people could still make money out of such situation, regardless of whether the business operation is a hidden gem or not. The syndicate for example make money. However, for ordinary people like me, broadly speaking there are two ways to make money. One way is to share a growing pie, where over time as a company grows and propers, the shareholder oriented management start returning cash to shareholders. In this approach, a shareholder does not need to depend on another person to buy his ticket at a higher price in order to make a profit/ exit.
However, based on FOCUS track record, as long as the old guards are still in control, I doubt they will share any fruit with the minority shareholders, regardless of whether the company propers or not. Remember this is a company that has never declared a single sen of dividend in its long existence. So that leaves only the other way of making money which is hoping for the next person to buy our ticket at a higher price, hopefully in the next round of speculation and mania. This is also called the Greater Fool Theory.
I'm not saying it won't work. Different people earn money in different ways. It's just that I don't like zero sum game. For peace of mind I rather stay with a good company with an honest management. Nonetheless I would like to thank you for explaining and sharing the details. Good luck to your venture.
I would "invest" in a shark counter (treating it like my own company) if my first principle is met -- 0.5¢ and cash cow (aka high margins). The sharks cannot trick you at the safest 0.5¢, and a cash cow makes mother tricks like a rights issue unnecessary! All other "bogus" prices like 87¢ are not safe! In short, think very hard about how you would lose before a profit. Also, the maximum gain starts at the 0.5¢ base. After goreng, the "greedy" sharks need the cheapest shares for the next round.
You have the skills and patience. From the way you described you probably enjoy the game. But I must say this is a game that only very few people can play well. For me sleep quality is more important :) Anyway good luck!
Four years ago, I told my readers a "shark," first-principle counter was not a bad thing; otherwise, how could you get the 0.5¢ shares? There are three reasons for the next round:
1. The sharks are still the biggest shareholders under the proxy accounts;
2. A greedy shark could not resist the quick-profit goreng;
3. Focus-PA holders would give 49.5¢ each conversion if mothers are > PA price + 49.5¢ -- the sharks had about RM90M cash by maintaining the 60-70¢ price range for about a year!
Even if there was no goreng, Focus is still a hidden gem because all consecutive gross profits from the past several years were used (via Other Operating Expenses) to open more expensive F&B brands and The Arch Galeries despite the "bogus" net losses!
Only two (me and one friend) in the whole of Malaysia bought the 0.5¢ PA over the past 1-2 years as we snapped all transactions! On the contrary, hearing so many stories about KLSE blue-chip losses, my first principle is the safest! However, like I emphasized, Focus is an "emergent" (no planning) 100-year opportunity, which was created by the sharks!
My first degree is in finance and accounting from renowned Baruch College in NYC, despite my PhD degree in software engineering pioneering (way before Ukraine war) unpiloted air vehicles (autonomous UAVs or drones) for the US Naval Research Laboratory. Our college had a link to NYSE to study all investment strategies, so yours are not new but classical.
The sharks already "shared" the first 100% return:) Unlike Fintec (biggest shareholder of Focus), the last capital change was in 2020 -- further changes are not necessary as there will be more cash flows from The Arch!
The Long Range Anti-Ship Missile (LRASM) or AGM-158C, resulted from my pioneering work, is securing the peace in the South China Sea! My coauthor can sleep well and need not worry about his daughters' future as the Chinese warships are no match for the autonomous and stealthy LRASM cruise (terrain-following & radar-avoidance) missiles:)
As for the US markets (especially NASDAQ) full of high-tech startups, the best strategy is to study the future-tech dominance. For example, I predicted the demise of Intel and the rise of TSMC more than 12 years ago! When you held the first iPhone in 2007, it meant the end of computers and x86 architecture.